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Urban Myths: Are GSA’s Prices Fair and Reasonable?

Over the years, some have questioned whether GSA Schedule prices are fair and reasonable, and such concerns have led to GSA launching efforts, such as Transactional Data Reporting and horizontal pricing analysis, to demonstrate that it is dedicated to offering its customers “competitive” (however defined) prices.  Now comes an MBA Professional Report published by the Naval Postgraduate School, which provides a business case analysis comparing GSA Advantage to Amazon Business from the standpoint of prices and processes. The study was completed in response to a request from the Air Force, which is considering entering into a pilot with Amazon Business in order to strategically source micro-purchases using an on-line platform.

The results of the study may be surprising in light of the recent legislative activity and discussions surrounding on-line acquisition options for government.  They also might inform those who cast a skeptical eye toward the value and vitality of the GSA Schedules Program.  The authors gathered data on the top 60 commercially available items purchased by the Air Force using government purchase cards (GPCs) and compared the acquisition outcomes on GSA Advantage and Amazon Business. They found that:

  • Prices were lower on GSA Advantage more than 80 percent of the time.
  • Although both platforms offered quantity discounts, prices on GSA Advantage were still lower than those on Amazon Business after applying the discounts.
  • Shipping was both cheaper and faster on GSA Advantage than on Amazon’s platform (an average of 5.45 days with free shipping on GSA Advantage versus an average of 9.25 days at an average cost of $2.33 on Amazon).
  • Every item the study reviewed was sold by at least one small business on GSA Advantage. By comparison, only 35 percent of the items were sold by a small business on Amazon.  In addition, the authors had difficulty identifying the small business status of suppliers on the Amazon Business platform.

Despite the benefits that the report identifies, GSA Advantage still has areas that could be improved:

  • The authors surveyed GPC holders and found that 70 percent preferred the Amazon platform to other platforms.
  • Minimum order requirements on GSA Advantage were unpopular among government buyers, and survey respondents felt that GSA Advantage’s search function was misleading because the minimum order requirements were not displayed in the search results.
  • Despite results that indicated the prices are lower on GSA Advantage─
    • More than 64 percent of buyers surveyed believe that prices on are lower than other online ordering websites.
    • Only 10 percent of survey respondents believed that GSA Advantage’s prices were lower than other online ordering sites.
  • More than 90 percent of the buyers surveyed believed that product reviews are important when making purchasing decisions. GSA Advantage affords limited, if any, access to product reviews, but such reviews are widely available on Amazon.

A key take-away here is that, notwithstanding demonstrated benefits of GSA Advantage, user experience is very important.  Thus, at a minimum, GSA should review the results of the report and work to improve its platform by updating the user experience and improving the search function. Likewise, a thorough review of the minimum order requirements on Schedules also may be in order.  At the very least, GSA might consider displaying the minimum order requirements within the search function to provide clarity for government users.  GSA should also engage in an outreach and education program among GPC holders, and seek to clarify misconceptions about GSA Advantage; particularly in light of the report’s findings regarding pricing.

Ultimately, this report addresses some perhaps unfair urban myths about the GSA Schedules, and it is great news for GSA.  It highlights the value of the Schedules program, which negotiates with industry to ensure that products that meet the Trade Agreements Act, small business, AbilityOne, and other government requirements are available on GSA Advantage at “competitive” prices.  Moreover, taken with the Order Level Materials Rule that was finalized this week, it shows that the Schedules program still is a relevant and viable channel, through which, the agencies may meet their needs safely and effectively.  FAS Commissioner Alan Thomas stated during the Section 846 public meeting earlier this month that GSA is not standing still as it continues to look for ways to improve its programs.  Here, it appears that GSA is starting from a position of strength as it moves forward.

Finally, it is important to note that the Federal Government spent more than $28 billion using GPCs during 2017.  Given the size of this purchasing activity, there must be careful and thoughtful consideration of the approach to on-line acquisition moving forward, as the decision here could have a significant impact on the market.  For instance, if these purchases are strategically sourced through a single e-commerce platform, rather than multiple portal solutions/providers, transaction fees alone could represent a windfall, if not a subsidy, to a vendor and thereby impact competition, small business participation, fairness, and, potentially, the government’s access to innovation.

The Coalition recommends this study to all stakeholders for their consideration.  As we continue to assess the findings, we expect more issues to arise, and if they do, we will address them in future blogs.

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